Wednesday, 19 November 2014

Why the China prize adds up for beef and lamb

China is all about big numbers. The population is 1.357 billion (2013 figures). 20.7 million are estimated to live in Beijing. In the capital’s largest residential district live more than seven million people. Getting the Metro from there into the city in rush hour, it will take you 40 minutes to queue to get on a packed train – despite the fact they arrive at a rate of one per minute.

Each year in China, 32 million people give up farming and become consumers – and this means more and more people are moving into the middle class, categorised as those spending $10 a day or more. This may not sound like much, but it in terms of additional purchasing power, it is massive. And the wealthier people become, the more they indulge more expensive tastes, including meat. Specifically, beef and lamb, including the fifth quarter. These cuts may seem to be the cheap ones to us, but they are more highly regarded in the Far East meaning that as standards of living rises, so does the demand for fifth quarter products.
There has been a lot of talk about access to the Chinese market for English beef and lamb for some time now. It was the topic of a presentation, for discussion and for a levy payer question at our recent annual conference. Access remains some way off – but it essential we continue working towards it and driving things forward. It will bring rewards for each and every beef and lamb producer and processor.

There was evidence of just how there demand is growing for our products at the FHC China event, in Shanghai, last week. The AHDB red meat export team helped organise a stand for red meat traders and exporters and, while the actual business being done was on pig meat products, there were repeated questions about when beef and lamb would be available and what more can we do to make it happen. The demand is clearly there, as if this needed any validation.

As early as 2003, BPEX identified the Chinese market as offering significant opportunities for export growth. Negotiations with China started in earnest in 2005. An inspection visit to the UK took place in 2009 and trade finally opened in 2011. This market has now become invaluable to the pig sector. Traders estimate the added value of the Chinese market is between 20p and 40p per kilo for pig meat. It is well on its way to being worth £50 million a year to the English pig sector.

We cannot make direct comparisons with pig meat because market dynamics are different but the trend is the same: with market access to China we will be able to sell parts of beef cattle and sheep we have no domestic market for to a growing consumer population with a rising appetite for beef and lamb products. As the standard of living rises, people are trading up from cheaper chicken and pork products to beef and lamb, and it is the fifth quarter products that potentially hold greater value there than the cuts we would purchase.

Of course, negotiations inevitably have both a technical and political dimension and this always has to be factored into the time it takes to reach agreements. This is true for all the markets we deal with and China is no different.
The process itself is slow anyway, and high level diplomatic support from the UK Government continues to be vital. However, the investment is worth it for all parties concerned and will ultimately lead to betters returns for processors and producers.